I recently reviewed the 2006-07 Fund Balance* information for Michigan schools. Like so many things in life, there is good news and there is bad news.
The good news is, on the whole, schools are doing better than I thought they would be. The number of districts in deficit for Fiscal Year (FY) 2007, which ended June 30, 2007, was 21, about the same as FY 06. However, in FY 04 there were only 10 districts in deficit.
Still, on the good news front, we ended last year with fewer districts in the 0-5% Fund Balance category - 56 in FY 07 compared with 63 the prior year. Also, there were slightly more districts with Fund Balances over 15% in FY 07 than the prior year – and, at 237, this is a significant number of districts that are financially healthy by this measure.
Business officials can and should be proud of their role in maintaining this level of financial stability in such difficult times.
However, we need to continue to be vigilant and to explain to our communities and staff why a Fund Balance of 15% is necessary. Because the state pays us 11 times a year, we need Fund Balances to avoid borrowing; and we need those dollars to help maintain programs and jobs during economically tough times like now. These dollars can only be spent once. If we cautiously spend down Fund Balances, we can maintain programs and jobs as we wait for the economy to improve and revenues to increase. (There is more detailed information and resource materials about Fund Balances on the MSBO website under “School Finance.”)
On the negative side, the statewide average Fund Balance for FY 07 fell from 13.01% to 11.81%. This represents a reduction of 1.2 percentage points or a decrease of 9.2%. Total expenditures for operating purposes are $14.2 billion so the “spend down” of Fund Balances was $168 million from one year to the next.
The picture simply isn’t pretty. I’ve used the metaphor before of Michigan schools being in a single file walking toward the edge of a cliff. Some districts have already gone over the edge. All districts are the same line; it’s just a matter of where in line. These numbers tell the story of a collective move toward the edge of that cliff.
A good question is, “At what price are schools maintaining their fiscal stability?” In other words, what did your district cut to avoid financial decline? We need to help our communities understand all the hard realities schools face. If you put off maintenance, major purchases of textbooks or supplies, or eliminated programs, you need to let your board, staff and community know what the tradeoffs have been.
We have increasing costs and stagnating or declining revenues. MPSERS continues to rise and is predicted to be more than 20% of payroll by 2013 and 27% by 2020. We have fewer students which means fewer dollars. At the same time we must provide new programs and creative alternatives for students.
In the face of the most difficult economic times in the last 25 years, we have to look for ways to improve education. That is our main mission, our imperative, and our state’s future is on the line.
There aren’t any easy answers. Each solution carries a cost. Closing schools is difficult and alienates a portion of the community. Trying to restrain health care costs creates schisms with our staff and, often, our communities are not supportive. Eliminating programs affects teachers and students and creates backlash.
Who was it that said, “These are the times that try men's (and women’s) souls?” Without being overly dramatic, that’s our situation now: trying times.
Trying times are often the best time to make needed changes. Mahatma Ghandi said, “Be the change you wish to see in the world.” That simple but profound statement says a great deal. What changes do you want to see? How do you want people (our politicians, etc.) to respond? How can we all model behaviors that will reflect well on us as a generation? What message do we want to send to students about how to deal with adversity?
I am proud that our members are facing these times with fortitude, creativity and hard work. Thank you for all you do.
*Figures related to Fund Balances are for K-12 districts only, and do not include ISDs or Public School Academies.